Indian Rupee Forwards Touch One-Week High on RBI Auction Plan Indian rupee forwards touched a one-week high after the central bank pledged to curb the supply of cash in a bid to stem an unprecedented slide in the currency. The Reserve Bank of India will auction 220 billion rupees ($3.6 billion) of cash-management bills every Monday, it said in an e-mailed statement on Aug. 8. The move follows a review of the impact of earlier measures to steady the currency and is for “effective liquidity management,” the RBI said. Indian financial markets were closed for a holiday on Aug. 9. One-month non-deliverable forwards touched 60.87 per dollar, the strongest level since Aug. 2, before trading little changed at 60.93 as of 9:46 a.m. in Singapore, data compiled by Bloomberg show. The rupee fell to an all-time low of 61.805 on Aug. 6 and has lost 9 percent in the past year. Its three-month historical volatility rose to 11.94 percent on Aug. 8, the highest level since 2009. “The RBI’s move is to ensure that the short-term rates stay high to make it expensive for investors to short the rupee,” said Khoon Goh, a strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The fundamental issue facing India has not changed though. With growth slowing and deficit countries getting overlooked by investors, the rupee will continue to come under depreciation pressure.” A short position is a bet a currency or security will decline. The central bank last month cut its economic growth forecast for the year through March 2014 to 5.5 percent from 5.7 percent, and said India’s record current-account deficit remains the biggest risk to Asia’s No. 3 economy. Gross domestic product rose 5 percent last year, the slowest pace in a decade. The sale of cash-management bills, which typically mature within 91 days, is in addition to about 150 billion rupees of bonds auctioned each Friday as part of the government’s budgeted borrowing program. The Finance Ministry also issues about 120 billion rupees of treasury bills, which mature in at least 91 days, every Wednesday. The central bank will sell 220 billion rupees of 35- and 34-day cash-management bills in two separate auctions on today and Aug. 13, it said on Aug. 8. Finance Minister Palaniappan Chidambaram is likely to announce measures to reduce the shortfall in the broadest measure of trade, the Economic Times reported today, citing people it didn’t identify. Possible measures may include a special drive to raise non-resident deposits, bond sales by state-run companies, and cutting imports of “non-essential” consumer goods, the newspaper said. In July, The RBI capped lenders’ borrowing through daily repurchase auctions and tightened cash-reserve-ratio requirements. It also asked foreign investors to prove they aren’t speculating on the currency and barred banks from proprietary trading in currency futures and exchange-traded options. The Securities and Exchange Board of India raised margin requirements and limited open positions in such contracts.
Posted on: Mon, 12 Aug 2013 02:52:55 +0000
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